I'm wondering whether the outcomes for the Techcrunch 40 are statistically different from the outcomes for a group of 40 randomly selected startups.
4 companies went out of business, 4 were acquired (with only one being a major success), several more are doing OK for themselves - which to me is not significantly different from the usual startup survival rates.
And these companies were supposed to be the cream of the crop! It shows how fundamentally difficult it is to make credible business forecasts in technology.
> It shows how fundamentally difficult it is to make credible business forecasts in technology.
Becoming a major success is fundamentally hard and predicting the future is fundamentally hard, so it shouldn't be much of a surprise.
You can see the effect in major established companies as well: Microsoft has two very successful products (Windows OS and Office), Google has one (search/AdWords). In both cases the core products are pretty much the entire profit for these companies. This is hardly for lack of trying, they have both launched dozens to hundreds of other products (and have tons of money to back them up), but have so far been unable to replicate the success.
It's not just technology either: Peter Lynch (a successful fund manager) coined the term "ten bagger" for a stock investment that increases tenfold in value. According to Lynch, ten baggers were incredibly satisfying and incredibly hard to find. (As I recall it from his book, the fund invested in hundreds of companies each year and there was still years between each ten bagger. In that perspective, one major success out of 40 seems pretty good.)
I guess it mostly goes to show that mountains of money tend not to lie around for the taking :)
I think I've only heard of two of those (mint and docstoc) - and they're not sites I use.
Getting some venture capital, which is hard enough in itself, doesn't seem to be any kind of decent predictor of success. This SaS business is a tough slog despite all the excitement people have about it.
Isn't the classic VC model an expectation of only ~10% real successes, a larger amount break even/moderate success, and about half failures? Although that may be a better success rate than non-funded companies, getting VC is not in any way equivalent to a guarantee of success.
I would rather see these companies rated for success by a large pool of vetted 'judges'. Yes it's subjective, yes it's how they got into the TC40 to start, but it's a lot more useful than the monthly uniques, which can't even be accurately known by us.
As long as the judges are careful not to associate blog press as success/promise, I think one could create an yearly rating for a large pool of companies and track the success of various conditions such as investors, awards, location, etc.
what strikes me, when reading these figures is the comparison between their total funding and the monthly uniques! E.g $2,880,000 vs 373 uniques in Feb 2010 for BroadClip ...
It is not that they aren't interesting. I think the problem is that they aren't available. Most startups are not in a situation where they are legally required to publicly disclose their finances, but they usually are required to publicly disclose their investments.
I agree with the other posters that it would have been really interesting to see which of those companies actually made a profit, and or gave positive returns to investors.
4 companies went out of business, 4 were acquired (with only one being a major success), several more are doing OK for themselves - which to me is not significantly different from the usual startup survival rates.
And these companies were supposed to be the cream of the crop! It shows how fundamentally difficult it is to make credible business forecasts in technology.